February 2006 Market Clearing in the Energy Industry 5-36 © Copyright 2006, CCRO. All rights reserved. test (i.e., a “public interest” standard)(and, second, under a standard of review that is available to FERC which allows the agency to approve rates and rate changes if they are "just and reasonable" as required by the FPA. The bankruptcy court's perspective on how to further the public interest thus can be significantly different than that of FERC. That is, a contract with a very favorable rate from the perspective of the power purchaser would be a most likely candidate for rejection by a bankrupt company. It is precisely this potential showing of favorable terms to the non-bankrupt party to the contract (and corresponding burden on the debtor-in-possession in Chapter 11) that the Bankruptcy Code envisioned as a basis for rejection, which rejection would, in theory, facilitate a successful reorganization and avoid the necessity for liquidation. Thus, the bankruptcy court's view of how to satisfy the public interest focuses, in the first instance, on the debtor and creditors and secondarily, on a broader constituency considering “just and reasonable” pricing. The result of these different standards is that a company trying to avoid an unfavorable power sale contract might satisfy the business judgment test required for rejection under the Bankruptcy Code yet fail to satisfy the public interest test of the FPA. 5.5.4. State Regulators In addition to federal regulators (e.g., FERC), state regulators may also have a significant role in effecting policy regarding energy markets.24 The impact of policy considerations by state regulators25 needs to be carefully considered in any clearing model design. The scope of state regulators’ oversight of participation in energy markets varies. All have oversight responsibility at the retail level and some, like the Texas Public Utilities Commission (TPUC), have oversight at both the wholesale and retail level. The TPUC is the sole regulator for Texas electricity markets administered by ERCOT. Likewise, for intrastate pipelines in Texas, the Texas Railroad Commission is the relevant regulator. Recently, new multi-state organizations, referenced by the FERC as Regional State Committees (RSC), have been formed to play a role in certain areas of wholesale electric market policy.26 The intrastate example illustrated above for Texas contrasts with other states where there is oversight by both FERC and state regulators. In these states, while FERC regulates wholesale market policy, the states determine, consistent with state legislation, how wholesale energy is procured to serve retail consumers. In states where deregulation has led to divestiture of investor owned utility generation and consumers are served by either competitive retail providers or an RFP-based default electric service, state regulators determine the policy regarding the manner in which both interface with the wholesale market. 24 ERCOT is subject to Texas Public Utilities Commission jurisdiction, not FERC. Additionally, as along with State regulators, there are other oversight bodies, such as the New Orleans City Council. 25 In Canada the Provincial Energy Boards are the senior regulator with respect to power, and not the National Energy Board 26 Examples of RSCs include the Organization of PJM States, the Organization of MISO States. The six New England states are currently developing the NorthEast States Committee On Electricity (“NESCOE”).